Tax on energy projects to hit $19b

Company tax and royalties paid by oil and gas companies would double to $19 billion under a bullish development scenario, according to new research for the Australian Petroleum Production and Exploration Association, but rising construction costs mean analysts are increasingly sceptical a new wave of LNG projects will go ahead.

An updated report to be released today by APPEA for Deloitte Access Economics estimates the total tax take from the oil and gas industry would rise from $8.9 billion in 2010-11 to $18.9 billion in 2035.

The analysis shows that under the highest development scenario, GDP would increase by about $455 billion in net present value terms over the period from 2012-2035, compared with the lowest development scenario of an increase of $357 billion over the same period.

APPEA also estimated more than $29 billion had been spent with Australian-based businesses as part of the current wave of investment with about $210 billion worth of oil and gas projects committted or under construction.

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APPEA chief executive David Byers said: "These sorts of benefits can't be achieved if project development costs continue to rise and long-term contracts are lost to other petroleum-exporting nations."

A note from Macquarie released yesterday warned rising costs were "strangling the golden goose" and said Inpex's Ichthys project could turn out to be Australia's last greenfields LNG development.

In the wake of a new cost blowout announcement from Chevron's massive Gorgon project, whose cost has risen to $52 billion, Macquarie said Australia's five most advanced LNG developments - Pluto (completed) PNG LNG, Gorgon, Queensland Curtis LNG and Gladstone LNG - were already 32 per cent over-budget and six months late despite being only 60 per cent complete.

With construction peaking in 2013, the analysts warned, "the worst may lie ahead".

The analysts said the growing suggestion was that Woodside's Browse LNG development, Australia's largest remaining undeveloped resource, would struggle to yield acceptable returns going to James Price Point, 60 kilometres north of Broome.

On Monday the Browse project hit another snag as the WA government admitted it had again botched the compulsory acquisition process to secure the site for the gas hub.

A Woodside spokesman said the provision of land for the project was a matter for the state and the latest hitch would not affect the timetable for a final investment decision, due by June 2013.